I came up with my current asset allocation in my vanguard roth/taxable accounts my 4th year in residency, I can’t remember how I came up with it but tried to stick with it the past two years. I’m wondering if I should switch to his Portfolio #8 as he’s got some pretty good statistical data. He has a nice table that shows different portfolios from #1 to #8 with #1 being the S& P 500 and #8 having a mix of S&P, US Large cap value, US Small Cap Blend, US small Cap value, US REIT,s +INT’l, and Emerging Markets.

This is my current asset allocation with rebalancing 1 a year and last year was my first attempt at tax-loss harvesting. I’m 32 years old and started off with a 15% Bonds allocation, but thinking of reducing my bonds allocation to zero.

Please let me know what your thoughts are on Paul Merriman’s Ultimate Buy and Hold Strategy, and if you have any advice/pointers on whether I should make the switch or any good tips on my allocation. Thanks!

If you believe in factor investing, Paul’s portfolios are excellent. If you don’t, they’re overly complex.

Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

I think those kinds of things are fine but definitely can be overly complex. That article is kind of a bummer. All text with no graphs of performance or any visual aid to immediately see things?

PDF isnt too bad, but what I’d love to see is what the variance of each of these portfolios is from a sector weighting type standpoint compared to the SP or a total market fund. Theres no way there isnt significant overlap that couldnt likely be replicated with fewer funds. It doesnt look bad, its just a lot of funds.

It would be cool to see what funds would be used to replicate it. Not a terribly difficult strategy, just busier than some.

I wouldnt switch to any single one of the portfolios, that would be performance chasing and not likely to replicate in the future. The value of this blend is the diversification.

If you believe in factor investing, Paul’s portfolios are excellent. If you don’t, they’re overly complex.

Click to expand…

Factor investing?

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This is the issue. You can’t even have a conversation about this without the background knowledge.

Factors, like small, value, momentum etc might be additional sources of risk and risk premiums for a portfolio. That is, a portfolio that is 75% total stock market fund and 25% small value fund may have better returns than a portfolio that is 100% total stock market fund. The historical data suggests that it is. But whether that pattern will persist in the future, we really don’t know. A factor investor would tilt the portfolio toward small and value stocks. A total market investor (one who doesn’t believe factors are real or worthwhile) would not.

Site/Forum Owner, Emergency Physician, Blogger, and author of The White Coat Investor: A Doctor's Guide to Personal Finance and Investing
Helping Those Who Wear The White Coat Get A "Fair Shake" on Wall Street since 2011

I guess the question is then what are the pros/cons of factor investing then. I tilted small-cap value based off of reading Dr. William Bernstein’s books Investor Manifesto and 4 Pillars of Investing, as well as reading the whitecoat investor and evaluating other portfolios. Also added 10% of REIT’s to add some real estate and variety to my portfolio. I’m thinking of readjusting my portfolio asset allocation because my situation has changed from when I was a resident to now where I have a lot more money flowing in. I have a good amount of emergency fund saved up, no debt, and I’m starting to feel like the 15% bonds part of my portfolio is unnecessary as I feel like I can be more aggressive given my situation. Based off Paul Merriman’s tables, although a bit more complex than the simple 3 fund portfolio, it’s still pretty straightforward and based on the past it seems like having portfolio #8 vs just investing in 1 or 2 funds made a BIG BIG difference that it investing in that plan is worth the the time and effort. It still seems like passive investing, just may be a bit more time and effort than the 3 fund portfolio. Thank you everyone for your input

I’m a big fan of Paul’s. The charting with statistical information provides the proof needed to be a believer. Having retired from a medical sales career in my mid/late 50’s several years back, I decided to go with the Ultimate Buy & Hold (#8). My hobby is following the performance of the stock market as well as various ETF’s & mutual funds, both growth and value styles.

Comparing my choices from Paul’s recommendations, which were virtually all value vehicles, to various growth funds, I noticed that growth funds have been outperforming for quite a while. While this has probably been obvious to many others, I noticed that value has lagged growth for a decade(+). Value has outperformed for longer periods but not being in growth or at least being more heavily weighted, performance has suffered in recent years.

I’ve bailed from the Ultimate Buy & Hold and I’ve taken more of a growth approach to my choices. The YTD performances are showing improvement in my account values vs. previous holdings. With our current administration and the low-interest-rate environment in place, I believe growth is and will be the better performer.

Always keeping a close eye on the performance of value funds, I believe that a turning point will occur and that value will come back with a vengeance proving Paul’s detailed research to be true.

It is one of many reasonable portfolios, you add some risk (small caps) in exchange for hopefully higher reward/return. As a starting physician, just know that your ability to create a larger gap between your income and expenses is going to matter much more in creating your wealth. My personal suggestion is to use a simple market cap indexed portfolio like the simple 3 fund portfolio and call it a day. As an ophthalmologist spend more time on researching your ASC and optical shop etc, seeing how you can get more returns from an investment you can control.